CHAPTER 10

Changing How We Think for the Digital Age

Domenico Lepore, Angela Montgomery, and Giovanni Siepe

Everyone doing his best is not the answer. It is first necessary that people know what to do. Drastic changes are required. The first step in the transformation is to learn how to change ... Long-term commitment to new learning and new philosophy is required of any management that seeks transformation. The timid and the fainthearted, and people that expect quick results, are doomed to disappointment.

—W. Edwards Deming

Every single thing that happens in a company, from how strategy is designed to how a widget or a software is made and sold, is the end result of one specific human activity: thinking. In many companies, the thinking that originates the actions that follow is, at best, vague. Anyone who has sat in enough meetings knows this.

Why is so much thinking in organizations vague? It’s not because people lack intelligence or qualifications. The fact is that the kind of thinking that can produce high-quality results at a systemic level needs to be learned, but who is teaching it?

Dr. Eliyahu Goldratt declared that his mission was to “teach the world to think.” At Intelligent Management, we have had the privilege of sharing the Thinking Processes developed by Goldratt with dozens of companies over the years. What is perhaps most exciting is to see how these Thinking Processes raise the collective intelligence in any organization. They allow people to achieve real focus together, as a group, and then to act on that focus in an orderly and effective way. Not only does this work raise collective intelligence, it also leverages the unique intelligence, knowledge, and experience of the group to create breakthroughs and innovation where previously they were stuck.

The faster our world and our markets change through technology, the faster we must acquire systemic thinking skills to think through the shifts and innovations required to lead, adapt, or simply keep up. As we have said, the new covenant that everyone in the organization (as well as the value chain in which the organization is embedded) must embrace requires a much higher ability to think, communicate, and act; it requires a new “wiring” in the way we measure, manage, and sustainably improve our efforts toward our goals. Before we take a look at a method for improving our systemic thinking skills, let’s look at one of the major obstacles to improving our thinking: an over-reliance on linear thinking.

The Dangers of Too Much Linear Thinking

Linear thinking has served humanity well. Being rational, after all, allowed us to emerge from the dark ages and the realm of superstition. We can thank René Descartes for providing us with a whole system of knowledge and investigation that allowed a description of the world through precise geometric relationships on a plane, including the ability to locate a point by giving its relative distance from perpendicular intersecting lines.

This logic brings us directly to the notion of a matrix. Once again, matrices have allowed us to deepen our understanding of many phenomena. The excel spreadsheet exemplifies the idea of a matrix. The feeling of power and control that tackling problems using a Cartesian approach gives us is incomparable. The problem comes when we try to apply “rational” methods beyond their scope. The Excel spreadsheet is a case in point. It certainly has its merits and is a useful tool for many tasks. However, it becomes an issue when we elevate Excel (or Numbers or any other spreadsheet) to the ranks of a management tool and use it for efforts that require something quite different.

By relying heavily on matrices, we create a dangerously limited view of our reality as organizations. Given the complexity of managing and controlling the combined efforts of many people, it can be tempting to resort to something that gives us the impression of control, such as an organization structured as a matrix. This is linear thinking and it is too limited to encompass the full complexity of human organizations as we understand them today. It leads you to think, erroneously, that if you optimize all the parts the whole will do better. Linear thinking focuses on addressing “symptoms” instead of looking for what is causing the symptoms to happen. In the same way, it leads people to think that individual performance reviews make sense. It fails to recognize that it takes time for a signal to propagate through a system and so the result of an action can only be seen much later, making it harder to understand where the result came from in the first place. It induces us to concentrate on costs and not on how to maximize throughput and it confuses price with value.

Linear thinking imposes old patterns; it expects more of the same because it sees a past that continues in a linear way into the future. For this precise reason, linear thinking is blindsided to disruption. As this book is being written, it is surely not a coincidence that iconic firms have failed under the leadership of CEOs isolated in their office and relying on linear spreadsheets to find out “what was happening” in the business.

We can’t keep managing organizations thinking that everything is linear and that a hierarchical functional organization with silos has any chance of being adequate for today’s complexity. What we know today that we could not know 50 years ago is that organizations are made up of networks, and they exist within other networks, and all of these networks are made up of multiple interconnections that increase their complexity. The relations within a network evolve in a nonlinear way. Indeed, we may even consider the conflicts that inevitably arise as explosions of nonlinearity. We may state that nonlinearity is the key to interpreting all complex phenomena that arise spontaneously when several entities interact, be they biological or human.

The systemic methodology for management developed by Intelligent Management approaches complexity from a nonlinear standpoint. Considerations of network theory led us to develop an organizational model for complexity that we call the Network of Projects described in ­Chapter 7 to completely shift away from a traditional hierarchical/functional model while protecting the legitimate needs that every organization has for control and growth.

Digitization is accelerating the need to reshape organizations to function beyond silos. Leaders and managers urgently need to get a grasp of knowledge of nonlinearity and learn how to manage organizations in a completely new light. In other words, the evolution that takes us from silos toward a network requires not just a shift in how we organize our work but in how we think.

How Can We Boost Our Systemic Intelligence and Learn to Think in a Nonlinear Way?

Learning how to change is perhaps the greatest challenge we face and the most urgent one. Technology demands it and it may not be an exaggeration to say that perhaps our very survival as civilizations depends on it. In this sense, the conflict “Change vs. Don’t Change” that we saw in Chapter 8 is probably one of the most profound issues of our times. To fully embrace and leverage new technologies to our benefit, we need to learn to think systemically. However, this is not usually something that we are taught at school. Indeed, thinking skills in general are not taught, beyond the ability to analyze something logically in terms of grammar or high-school math. Thinking, however, is never a purely logical activity. It is always informed by our emotions, our fears, and our desires. Above all, our thinking is “clouded” by our assumptions and the mental models we inevitably bring with us as part of how our brains have developed. These assumptions and mental models are intimately connected with our personal experiences and the environments where we learned to interact with the world. For example, if we ask an American, a Swede, and a Japanese person what they think about the right for civilians to bear arms, we will no doubt receive very different answers. It is perfectly understandable that people from different backgrounds have different worldviews. However, when people need to interact to achieve a goal, these differing worldviews often lead to conflicts.

The Creative Nature of Conflict

Thanks to the different worldviews or assumptions about reality that various members of any organization or value chain bring to the table, conflict is inevitable. A conflict is a form of “constraint.” So far in this book, we have framed several situations or problems as “conflicts” following the approach developed by Dr. Goldratt. The Conflict Cloud is a powerful, structured, and highly effective way to leverage conflict as an opportunity for breakthrough and innovation. Indeed, conflict is an opportunity for creativity.

Why is this so powerful? Because no matter the conflict addressed, it takes into consideration for all parties the two fundamental human drivers: control (this connects with fear, restraint, stability, security, immanence, etc.) and vision (this connects with desire, expansion, satisfaction, transcendence, etc.). In any conflict, these two needs exist in a variety of manifestations, and any sustainable solution must respect and protect them. This is key to achieving success through conflict.

In our experience at Intelligent Management, every organization has to deal at some level with the most fundamental organizational conflict of adopting a hierarchical structure or not adopting one. How they choose to address this conflict will dictate the pace at which they are able to innovate and grow. The Network of Projects solution was developed as a systemic solution to this fundamental conflict and invalidates many of the assumptions or mental models that keep companies stuck in outmoded models by harmonizing and connecting the work of all those involved. It does so in a way that ensures the needs for vision and control unique to each organization are satisfied.

Without the framework of the Conflict Cloud, it would not have been possible to develop the Network of Projects solution in such a robust way. Without the creative friction that comes from conflict and without the intrinsic limiting elements we experience in every situation we try and improve, there will never be the signs that lead to a systemic solution.

The Thinking Required for Change

The major problem with replacing a hierarchical mindset lies in the subliminal, unchallenged mental models that make us believe that an organization requires a superimposed control mechanism, be it a boss, a function, or an accounting structure based on cost accounting type considerations. The Thinking Processes from the theory of Constraints help us understand the connections, linkages, and the overall mechanism by which we infer reality. Reality is shaped in our minds by connections that largely remain unchallenged unless we unveil them. By making explicit the cause-and-effect relationships with which we perceive reality, we have an opportunity to challenge all of those assumptions that limit our ability, for instance, to work within a non-silo infrastructure, like a network of projects. More in general, if we want an organization where conventional hierarchy has been challenged to function well, we must enable higher forms of organizations as “thinking systems”; attempts to do this are ­stifled by both current educational systems and the corporate world.

It is not enough simply to change processes or make organizations flatter. Flat organizations could easily turn into a short-lived gimmick unless we systemically challenge the working and, ultimately, existential paradigms that govern the image that we have of what it means to live and work together. This requires a considerable cognitive effort; without the right methods to support that effort there can be little guarantee of continued success. The next section is dedicated to explaining how the Thinking Processes from the Theory of Constraints can help to do ­precisely that.

The Pattern for Change with the Thinking Processes

In the Decalogue approach, all the conversations for action that take place in the network can be transmitted through the use of the Thinking Processes; they provide heightened focus, accelerate discussion and consensus, and provide easy to communicate, visual and verbal results. They are powerful enhancers of Involvement and Flow. Through continued and ongoing use, they can reduce the variation that inevitably arises when points of view and ways of expressing those points of view are allowed to deteriorate. Reducing variation through the Thinking Processes thus increases Quality even at the level of human interaction. They can be used in a continuous cycle, from creating overall long-term strategy, down to the daily guidelines for carrying out repetitive tasks and new tasks alike. They provide a tangible resource to reinforce the systemic nature of the work, and having such a resource is crucial to support the cognitive ­challenges involved.

By following the logical sequence in the use of the Thinking Processes, as illustrated further on, organizations can shift away from an organizational model that is inhibiting their full potential toward a model based on a network of synchronized projects using the ­Critical Chain algorithm. The journey starts with the building of a “Core Conflict.”

Building the Core Conflict

Using cause-and-effect logic, the building of a Core Conflict provides us with a cognitive snapshot of the current reality of an organization. This is achieved through verbalizing our intuition into four “categories of speech”: the “reality” of the conflict between desired reality and undesired reality, the needs underpinning those positions, a common goal, and assumptions (mental models). This action alone is a huge leap forward in our understanding of our situation.

We start by identifying the Undesirable Effects (UDEs) that the organization is experiencing in its way of working. This is a list of factors that are creating discomfort and represents the pain or “symptoms” currently present. We may even describe them as emergent properties of the network of interactions within the organization. Once identified, these UDEs are summarized into one, overarching UDE that sums up the current, unsatisfactory reality. We then verbalize what a desirable reality would look like. We call these positions in the conflict cloud D and D’. These become the two conflicting positions D and D’ of the “Core Conflict Cloud” (Figure 10.1).

Figure 10.1 Positions D and D’ in the Core Conflict

This allows us to move on and identify the profound needs underlying these conflicting positions that drive an organization. We state the need for “control” that forces us to accept or to cope with D; we call it B. Then we state the need for “vision” that prompts us to say that D’ is the reality we would like to live in; we call it C (Figure 10.2).

Figure 10.2 The needs B and C

Once these needs are precisely verbalized, the organization can then derive the common goal that satisfies those needs, thus providing an organic direction rather than artificially imposing a goal (A). The needs B and C must be simultaneously satisfied in order to achieve the goal in A (Figure 10.3).

Figure 10.3 The Core Conflict with positions, needs, and goal

The first phase of building a Core Conflict generally involves a group of leaders and executives who are free to “bitch and moan” until all the UDEs are verbalized and the conflict is built. Verbalizing UDEs is a very “feel good” exercise where everybody agrees that the company is plagued by these effects. These effects are and feel “real” and everybody would like to get rid of them. Summarizing all the UDEs in one single statement is normally a little cumbersome, but it is generally done in a few hours. At this point, the procedure of identifying the desired reality, needs, and goal begins and the end result is normally welcomed as a breakthrough. How does that breakthrough happen?

The conflict cloud helps to sharpen our intuition. In a very short time, the group of leaders and executives has moved from an often disparate set of nonverbalized hunches to a clear-cut picture of the forces that keep them from achieving their goal. Moreover, a precise description of the needs that craft the psyche of the organization goes a long way toward helping to understand the “why” we are trapped in this conflict, the reason for it. We believe that no top management strategic retreat session delivers a tangible and operational output like this one. Now that the intuition is strong, we can make it stronger.

What transforms a Core Conflict into a full-blown picture of our current reality is a disciplined, orderly elucidation of all the mental models that give birth to the conflict. These mental models are deeply rooted images that we have of ourselves and the world around us. These mental models, which we may also call “assumptions,” are the cognitive lenses through which we perceive reality.

Systematically surfacing the assumptions is the most challenging aspect of the Core Conflict because we have to think hard to “smoke them out.” Assumptions are, like any other mental construction, the result of factors that are external (the environment, education, experiences, values, etc.) and internal (the chemistry and physics of our mind). The difference between an assumption and a statement of reality is only the realm of validity and this is determined often by cultural circumstances. A practical example of this would be to take a sentence like “In a democracy every citizen is entitled to decent, affordable and reliable healthcare…” and ask for a comment from a statistically representative sample of individuals in the United States, Canada, and Europe.

Assumptions are the logical connectors between goal, needs, and wants; they help us see the logic that shapes the conflict. A conflict with its set of clearly verbalized assumptions portrays the current reality precisely in the way we experience it and is the strongest possible support we can provide to our intuition (Figure 10.4).

Figure 10.4 Conflict with assumptions

Goal, needs, wants, and assumptions tell us why we are in the current state of reality. But they also pave the way to come out of this reality and move toward a future that is more desirable.

As we said, assumptions are mental models that we have about the world; they are formed as a result of experiences and sociocultural circumstances. Assumptions are, in every respect, a reality for the person that develops them. These assumptions, particularly the ones that we verbalize between D and D’ in the conflict, are, de facto, the constraining element of our reality; they are our cognitive constraint.

Once completed, the Core Conflict provides us with a clear understanding of the prevailing mental models (assumptions) that are keeping the organization stuck on the path toward its goal. This corresponds with the first phase of change: “What to change.”

Finding the Breakthrough Solution with “Injections”

By systematically invalidating the assumptions between D and D’, it is possible to verbalize “Injections” to the conflict. An injection is a systemic solution that is derived organically by challenging the assumptions between D and D’ with logically valid statements that respect the needs expressed in B and C. This is where breakthrough solutions can be developed. The more “core” is the conflict, the more powerful the solutions must be. It is important to be rigorous about injections; in order to qualify as “assumption sweepers,” these statements disproving our assumptions must fulfill two prerequisites (Figure 10.5):

Figure 10.5 Cognitive Constraint

1. They must logically invalidate one or more assumptions.
2. They must protect/address both needs OR one of them and be ­neutral to the other.

Injections are solutions to the conflict; by invalidating all the assumptions, they “evaporate” the conflict cloud (D and D’ disappear) and can potentially move us from our Current Reality to a more desirable, less constraining Future Reality.

However, in order for this to happen, we have to ensure that this set of Injections is as comprehensive and as free as possible from potential negative implications. Only then will we have a full understanding of the pattern in front of us. Only then will we have a thorough comprehension of all the potential ramifications of the solutions we identified (the Injections).

The Future Reality Tree

These solutions/Injections are then connected together using the Future Reality Tree (FRT). The FRT corresponds with the second phase of change, “What to Change to.” Using a logic of sufficiency, this process maps out the solutions in a progressive and integrated pattern toward the goal previously identified in the Core Conflict.

The FRT strives to ensure the completeness of the set of Injections identified, hence providing a conceptually reliable path to the future. The process of building an FRT requires some skill, a bit of experience, and a fierce determination. It is in no way an academic exercise nor is it an exercise in conventional logic. Building an FRT is only possible if we have embraced the vision and the method that supports it; the vision is that of a company that takes very seriously its commitment to the future and that sees itself as an ongoing generator of wealth for all its stakeholders and society at large. The method is the orderly, relentless identification of all the cause-and-effect relationships that are likely to shape the future if certain actions are carried out successfully. In this sense, the FRT is similar in nature to the Plan-Do-Study-Act (PDSA) cycle because it prompts a rigorous, scientific investigation of the subject matter.

Once we have built the FRT, we can use the Thinking Processes known as Prerequisite Tree and Transition Tree to ensure that we carry out a series of effective actions that are consistent with the solutions we have identified so that we can transform them into reality. We have described these Thinking Processes in detail in our books Sechel: Logic, Language and Tools to Manage Any Organization as a Network (Intelligent Management Inc. 2011) and Quality, Involvement, Flow: The Systemic Organization (CRC Press 2016). Here is a brief summary of how the Thinking Processes work together to create a complete cycle of Transformation.

Summary of the Cycle of the Thinking Processes in the Decalogue

By following the logical sequence in the use of the Thinking Processes, organizations can shift away from an organizational model that is inhibiting their full potential toward a model based on a network of synchronized projects using the Critical Chain algorithm. The cycle of Thinking Processes moves an organization through the three phases of change as identified in the Theory of Constraints: What to Change, What to Change To, How to Make the Change Happen.

What to Change:

• Identify the “UDEs” of the organization (symptoms of ­current reality).
• Summarize into one, overarching UDE that sums up the current, unsatisfactory reality.
• Verbalize what a desirable reality would look like so we now have the two conflicting position of the “Core Conflict.”
• Identify the profound needs underlying these conflicting positions (control and vision) and the Goal common to them.
• Surface systematically all the underlying assumptions (mental models) that connect the statements contained in the conflict.

What to Change To:

• Systematically invalidate the assumptions between D and D’ to achieve “Injections” (systemic solutions that respect the needs expressed).
• Connect Injections together using the FRT.

How to Make the Change Happen:

• Build a Prerequisite Tree to obtain a map of Intermediate Objectives for every Injection.
• Build a Transition Tree for each Intermediate Objective (where needed) to identify tasks.
• Trim potential negative implications stemming from performing tasks (or, more conventionally, from the injections developed)
• Schedule—These tasks, free from negative implications, can then be scheduled into a project using Critical Chain.
• Repeat—The cycle of Thinking Processes can be repeated on an ongoing basis, thus conforming to the PDSA cycle of continuous improvement advocated by Dr. Deming ­(Figure 10.6).

Figure 10.6 The cycle of thinking processes as used in the Decalogue method

Understanding, Knowledge, and Science in a Conscious Organization

Accomplishing the organizational transformation required for all organizations to fulfill their role of sustainable wealth creation does call for a higher and better use of our intellect. The thinking leveraged by the Thinking Processes designed by Dr. Goldratt is critical to this end. Understanding and knowledge must be solidly linked to the scientific approach and the wealth of discoveries it has generated in the last 350 years and that it continues to generate.

The essence of this scientific approach is embodied in the PDSA cycle, advocated by Dr. Deming as the main mechanism to generate and sustain the application of knowledge within any organization. Each of the four steps of this cycle must be guided by statistical insight. The PDSA cycle is rooted in the epistemological belief that phenomena must be described and understood in statistical terms; this statistical vision of the world, largely applied in the investigation of the natural world, has been adopted by organizations in a limited way and completely misapplied or ignored by economists and financiers, not to mention accountants.

An organization with a high level of consciousness has, by definition, a high level of interconnection with those who work within its system, with those who supply it, and with those who are its end users. The ongoing task is to constantly satisfy better the needs for control and vision of those who work within the organization and of those who interact with it up and downstream, throughout the entire value chain. The inevitable outcome of this level of consciousness and connection is a more ethical way of operating. There is automatically no space or use for hedging and price wars, or for pollution of the environment. The inevitable outcome is enterprise with a conscience.

Our ability to create and thrive within this kind of organization is directly linked with our ability to increasingly do who we are. This requires us to accept a level of personal freedom to which few are accustomed and even fewer feel comfortable with. This does not mean laissez-faire: it does not mean just doing whatever you want. It means accepting the responsibility of understanding that our only true limits are ourselves and what we are able to perceive for ourselves. Our limits are mental models, and our mental models dictate the boundaries of our actions. As we begin to challenge these models/assumptions, we begin to taste the vivifying experience of exploring our true potential. Fulfilling that potential is not a question of luck but one of choice.

The prevailing management style (or lack of it) has taken the separation between knowledge and consciousness to an extreme and impaired people’s ability to choose intelligence over stupidity. This ability needs to be given back and enhanced manifold. Organizations must overcome the damage caused by this disconnection by leveraging this intrinsic unity between consciousness and knowledge, by relearning how to connect learning and choice, and by retooling its people’s ability to manage intelligently. A new covenant is required, one where each individual has the opportunity to better themselves and, in so doing, better their organization. We have the intuition, we have the understanding, and we have the methods to make it happen. However, in order for the transformation to truly take hold, we need to create a new kind of leadership and that leadership must be the expression of a new Economics. We take a look at what that can mean in the following chapter.

Closing the Gap

No matter what we try and achieve, there will always be a gap between what we perceive is possible and what we are able to bring into reality. That is the human experience. It is also why we chose the logo we did that includes the shape of the Hebrew letter hei.

When we act on the physical world, we change it and transform it, but sooner or later we find an insurmountable barrier, something unbridgeable between our own inner truth and an obstinate external reality. This gap is between thought and action.

Symbolically, the letter hei represents the human effort to close the gap, completing the work to help transform the world into what it can potentially become. In other words, bringing heaven down to earth through our actions.

We have to keep trying to improve, but it is our very knowledge of the gap between what we are and what we ought to be that makes us able to be productive partners in the co-creation of this world. It’s a lifetime’s work. It never ends.

Often, the main obstacle lies in our inability to change the way we perceive and think about things. Most of our work at Intelligent Management is helping people to make that cognitive leap. When we educate ourselves to think and act systemically, we become capable of so much more than we imagine. As Einstein put it, “Those who think it’s not ­possible shouldn’t disturb those who are doing it.”

Summary of Chapter 10

• Everything that happens in a company is the end result of thinking and, more often than not, this thinking can be vague.
• Systemic thinking skills can be learned.
• The Thinking Processes developed by Dr. Eliyahu ­Goldratt enhance people’s ability to think systemically, both ­individually and as a group.
• Over-reliance on linear thinking is dangerous in a ­complex world.
• The systemic methodology for management developed by Intelligent Management approaches complexity from a nonlinear standpoint.
• The evolution that takes us from silos toward a network requires not just a shift in how we organize our work but in how we think.
• Conflict is an opportunity for creativity, and the Conflict Cloud from the Theory of Constraints is a powerful ­Thinking Process to leverage conflict as an opportunity for ­breakthrough and innovation.
• The Thinking Processes from the Theory of Constraints ­provide a complete path for systemic transformation.